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Hero Honda to decide on scooter foray in fiscal

BS Corporate Bureau

The Rs 39.17 billion Hero Honda Motors Ltd will take a decision on entering the scooter segment within this financial year. As per its agreement with Honda Motor Company of Japan, the Munjals, promoters of Hero Honda, have the option of entering the scooter segment in 2004.

Munjals and Honda of Japan had got into this agreement after the latter decided to set up a wholly-owned subsidiary -- Honda Motorcycles and Scooters India Ltd. As per the agreement, HMSI, which is scheduled to launch its first product (a scooter christened Activa) in July this year, is also free to enter the motorcycle segment in 2004.

Pawan Kant Munjal, managing director, HHML, said: "I have no doubt in my mind that Honda of Japan will give us the technology if we decide to enter the scooter market in 2004."

During the course of the current financial year, HHML will hold market surveys to study the scooter segment. "We expect the entry of Honda into the Indian scooter market (through HMSI0 to revive the scooter market," Munjal said. Last financial year, the market for metal-bodied, geared scooters had dropped by almost 40 per cent.

Munjal admitted that the visit of Hiroyuki Yoshino, president and CEO of Honda, has made "a lot of difference" to the outlook at HHML. He said HHML is still open to picking up equity in HMSI. "Honda is likely to stabilise its operations after a year or two and may offload equity. In such a scenario, they will obviously offer equity to us first," he said.

Munjal said that Honda of Japan and HHML are also open to looking at synergies in manufacturing. "In future, we could look at manufacturing certain components at HMSI," he said.

During the current financial year, the company expects a 20 per cent growth in its topline. For the financial year ended March 31, 2001, the company has posted a net profit of around Rs 2.50 billion.

The company on Tuesday launched Joy -- a 100cc motorcycle -- in New Delhi. The company hopes to sell around 8,000 to 10,000 units of Joy every month, Munjal said.

Atul Sobti, senior vice president, marketing and sales, HHML said that during the current financial year, motorcycles are expected to grow by around 15 per cent while two-wheelers are likely to grow by 5 to 7 per cent. "I expect this financial year to be the last year of the swing in customer preference away from scooters to motorcycles," Sobti said.

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